Morgan Stanley report about Argentina: A Virtuous Cycle of Rising Growth and Returns

Morgan Stanley research presents: A Virtuous Cycle of Rising Growth and Returns

“We expect Argentina to normalize its economy, driving a virtuous cycle that boosts long-term growth and returns in the next five years. We see +133% (+18% CAGR) USD return for equities, +49% (+8% annual) for local rates in USD terms, and +42% (+7% per year) for sovereign credit during this period.”

“We think Argentina will not only normalize its economy in the next five years, but will also generate a virtuous cycle that will drive investments that boost long-term sustainable growth (potential GDP). By building a proprietary model based on data supplied by the authors of a joint Harvard/University of Buenos Aires study, we estimate that Argentina can lift and sustain potential GDP growth from the current 0.9% p.a. to 3.1% p.a. in the next five years, making its economy less prone to seesaw performance (see A Virtuous Cycle to Lift Long-Term Economic Growth ). Our model allows us to estimate the output gap, which in turn helps generate our actual growth and inflation forecasts.”